Budgeting in Retirement: Options for Semi-Retirement

Change is hard – even when it’s a good change. Imagine doing something steadily for, say, 40 years of your life, only to suddenly stop. It might sound strange to have toomuch free time. But some new retirees could find the process of transitioning to retirement akin to quitting caffeine or nicotine, explains George S. Middleton, a certified financial analyst and certified public accountant: “[Not working] can be a shock to the system,” says Middleton. It can sometimes be better to gradually wean yourself off working than to go cold turkey. “Semi-retirement provides time and space to make the transition.”

In fact, it turns out that 72% of workers ages 54 to 72 would prefer semi-retirement, according to a Harris Poll study. Working part-time during your retirement years can offer many perks. If you weren’t able to save as much as you had hoped to for your golden years, it can provide a much-needed boost to your retirement income. Plus, it could provide an outlet to meet interesting people, provide structure and routine, give you mentally engaging activity and keep your skills sharp.

Here are a few ways to approach semi-retirement:

Know the Impact of Your Semi-Retirement Income

Even a modest part-time job can go a long way toward supplementing retirement income needs, explains Mike Zung, owner of Java Wealth Planning. Zung provides the following example: Using the 4% rule (where you only draw 4% of your portfolio the first year of retirement and subsequent years adjusted for inflation), bringing home an extra $20,000 a year is the same as having $500,000 in investments. And the less money you need to pull from your retirement accounts, the longer that money can stay invested and continue to compound.

When considering semi-retirement, figure out how working will impact your income. This includes your Social Security benefits, withdrawals from your retirement accounts and money pulled from savings. It can help you gauge how much you’ll need to earn to maintain a certain income for a given number of years. You can also use a calculator to help forecast your financial future.

Map Out Your Schedule First

If you’re not sure if semi-retirement is for you, Michael T. Johnson, J.D., certified financial planner and founder of Flagstone Financial Management, recommends trying the following exercise: Try to fill a blank calendar Monday to Friday from 8:00 a.m. to 5:00 p.m., as if you were retired. If you’re not able to fill traditional hours, Johnson suggests working part-time. “This gives them the opportunity to explore other passions and hobbies, but still get positive feedback from work,” says Johnson.

Another experiment for pre-retirees? Take an extended vacation and see if you like it. “Obviously, not everyone is about to take off 4 – 12 weeks from work, but it’s a good practice run for retirement,” says Johnson. “If you find yourself bored to death after three weeks, maybe you shouldn’t retire fully.”

Gradually Scale Back on Existing Work

If you offer a professional service and work for yourself, try not taking on any new clients or patients, suggests Stephanie Bacak, a certified financial planner with Capstone Global Advisors. That way, your transition into semi-retirement will be a gradual, natural one. If you have a job with seasonal fluctuations, such as an accounting position or a job as a labor lawyer who works with mall Santas and holiday employees, try to take more time off during your off-season.

“Maybe you go a step further and limit the hours a day or weeks a month that you see patients or clients,” says Bacak. Once you hit the sweet spot of work and money earned from your existing clientele, you can stop promoting your services or accepting referrals altogether.

Become a Consultant

It turns out that the gig economy is made up of two major groups. The first group is made up of those who are in search of full-time work and are looking for side jobs to earn some money in the meantime. The second group is made up of those who don’t want or need full-time employment. It turns out the second group is made up of older, more seasoned workers. As you might imagine, part of this second group is made up of retiree-aged folks.

You can strike out on your own and become an independent consultant in the field you have decades of experience in or work for a former employer. “A lot of employers like this route because they can keep the employee in the same role without training someone new,” says Adam Day, a certified financial planner, retirement income certified professional and chartered life underwriter at Wealthquest. As for you, you can use your years of experience working for a company as leverage to negotiate for higher pay or keep some of your benefits.

Pursue a Passion Project

While it might not be as lucrative as consulting or working part-time for a former employer, turning a passion project into a side hustle could be a fun way of spending your retirement. Time spent doing more of what you love is priceless, points out Ian Bloom, a certified financial planner and owner of Open World Financial Life Planning. As Bloom explains: “Since we haven’t figured out a way to extend life for money, the best thing you can do is enjoy more of your life while you still can.”

Do you have a knack for calligraphy and want to invest more time in mastering this fine craft? Considering selling some of your works on Etsy or Society6. Does the inner baker in you long to emerge? Sell homemade baked goodies at a local farmers market or food fair. Or you can explore your options on job sites geared toward seniors, such as:

This Post Has 4 Comments

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